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Get serious about saving for your home loan deposit

Making the move out of houses for rent into a place of your own can seem daunting, but the fact is it’s unlikely to be something that happens overnight. Most people dedicate years to saving up for a deposit for their first home loan, which will need to be at least five per cent of a property’s value.

This is likely to involve a certain amount of sacrifice along the way, especially if you’re not already in the habit of saving.

Having financial confidence

Firstly, you’ll need to give yourself enough confidence to set money aside in a savings account. Once you’re in the right mind set, you might be surprised at just how naturally this comes.

New Zealand Bankers’ Association chief executive Kirk Hope said: “Financial fitness is a lot like physical fitness. It’s easy to put off taking the first step. But once you do, you’ll really notice the benefits.”

He suggested speaking to a financial expert who will be able to put your savings goals into perspective. They might also be able to recommend specific products that will help you reach your objectives sooner than you think.

Being aware of your own finances

One difficulty that some people encounter is they’re not entirely aware of their own financial situation. This can make it difficult to come up with a solid savings plan and could mean the deposit building process is longer than it needs to be.

Statistics New Zealand reveals that spending more than we earn is a national trait. During the year to March 2015, it noted that household income stood at $134.4billion across the country, while household spending registered at $135.3billion. As a result, household saving had a negative reading, as saving has gradually declined since its 2012 peak.

Sitting down and working out exactly how much money you have coming in each month is a great place to start, as this will help determine what you can afford to save.

Focusing on the long term goal

Of course, once you’re on the property ladder, your borrowing power is likely to increase. Research from the Reserve Bank of New Zealand shows that as property values rise, household wealth also escalates as you’ll have an increasing amount of equity in your home.

The total value of housing increased $379billion across New Zealand between 2001 and 2008. While this creates some exciting prospects, it also means your deposit and home loan will be bigger than what it would have been several years ago.